Germany says Vattenfall has no grounds to seek arbitration over nuclear phase-out

Photo: Vattenfall

Reuters | 8 May 2018

Germany says Vattenfall has no grounds to seek arbitration over nuclear phase-out

By Gernot Heller and Lefteris Karagiannopoulos

BERLIN/OSLO May 8 (Reuters) - Swedish utility Vattenfall has no legal grounds to ask a U.S. arbitration court if it can claim 4.7 billion euros ($5.6 billion) from Berlin for forcing it to halt nuclear production, the German government has said in a letter.

The letter, seen by Reuters on Tuesday, was addressed to a German lawmaker who had inquired about the government’s position on Vattenfall’s attempts to seek damages from the International Centre for Settlement of Investment Disputes (ICSID).

In 2016 Germany’s highest court ruled that utility companies were allowed to seek limited damages from the German government over the hastening of nuclear plant shutdowns after Japan’s Fukushima disaster.

As a non-German company, Vattenfall first turned to the ICSID in 2012 with the filing of a complaint against the German state.

Utilities E.ON, RWE and Vattenfall sued the German government, arguing that the decision to close all nuclear plants by 2022 amounted to expropriation.

“In the pending arbitration case of Vattenfall against the Federal Republic of Germany, the federal government has requested that the arbitration be dismissed,” Deputy Economy Minister Thomas Bareiss wrote in the letter, dated April 21.

Pointing to a recent ruling by the Court of Justice of the European Union (ECJ) on a similar case, Berlin said that an arbitration from a court outside an EU country in relation to a case between a company and a member state is invalid.

In March the ECJ ruled that arbitration clauses common to almost 200 investment agreements between EU member countries violate EU law, casting doubt on such deals and others struck by the bloc as a whole.

The ECJ found that an award of damages in 2012 to Dutch insurer Achmea from Slovakia under a bilateral investment treaty inherited from former Czechoslovakia breached EU law.

Vattenfall, which is expecting a decision from the United States-based ICSID this year, said the ECJ ruling has no effect on its pending case against Germany.

“Unlike the Achmea case, this procedure is based on the European Energy Charter Treaty ... The contract was signed not only by all member states and third countries, but also by the EU,” said Vattenfall’s media relations head Sandra Kuhberger.

Germany also rejected as baseless compensation claims by utilities, arguing that its decision to end nuclear power was justified because nuclear risks had changed after the Fukushima meltdown in 2011. It also says a majority of voters back the phasing out of nuclear power.

“Vattenfall is not questioning the decision to phase out nuclear power in Germany. But we insist on receiving compensation for the financial loss suffered by the company,” Kuhberger added.

Vattenfall, which derives much of its turnover from activities in Germany, had to idle the Kruemmel and Brunsbuettel reactors in northern Germany permanently in 2011 when the government decided to close old reactors and accelerate the exit programmes for the remainder.

ICSID declined to comment on any potential implications of the previous ECJ judgment, saying it did not have the parties’ consent to disclose further information on the status of proceedings.

After a 14-year dispute between Quiborax and the Bolivian government, the International Centre for Settlement of Investment Disputes (ICSID) rejected Bolivia’s application to annul a US$48.6mn award in favor of the Chilean mining company.

The German cabinet has confirmed that two utilities operating in Germany are entitled to compensation for losses stemming from the country’s nuclear phaseout. The move is in line with an earlier top court ruling.

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